European Stocks in the Black; Banks Bounce Back - TheStreet

FRANKFURT -- Stocks started the week by opening down, but soon bounced into positive territory on technically oversold conditions and cautious bargain-hunting.

Battered banks, which led the market down the past two weeks, were among the strongest winners.

Commerzbank

jumped 6.2%,

Paribas

rose 6.3%, and

Deutsche Bank

climbed 5.2%.

Despite the rebound from opening levels, overall market sentiment remained subdued and nervous after last week's painful selloff. The weekend

G7

meeting of finance officials in Washington produced little to soothe markets here or to boost the sagging dollar against the mark.

The dollar remained weak at 1.6362 marks, which cuts deeply into European profits and is one of the biggest concerns of European investors.

Market movements were volatile today, especially in Frankfurt, where the

Xetra DAX

was up 92 points, or 2.3%, at 4112. In London the

FTSE-100

was up 13 points, or 0.3%, at 4764, and in Paris the

CAC-40

was up 27, or 0.9%, at 3066.

Amongn individual winners today were

Daimler-Benz

, up 6.4%, and

Alcatel

, up 7.8%.

France Telekom

rose 6.7% after the government said it was postponing a new share offering until market conditions were more favorable.

Market volumes across Europe were light to moderate, with most potential bargain hunters still not ready to place big bets that markets are near a bottom. In Asia, most stock markets dropped overnight on G7 disappointment, with the

Nikkei

slipping 2.1% to close at 12,948, below the important 13,000 level. European markets are also edgy about the possibility of further bombshells in the hedge fund world, as well as in emerging markets and the bank sector.

Futhermore, European bourses remain tightly chained with Wall Street, and sentiment is widespread here that U.S. stocks -- which have strongly outperformed Europe since July -- are due for big losses.

S&P 500

futures dropped sharply this morning in Europe, but have since recovered some of that ground. At 7:45 a.m. EDT futures were down 6.50 points at 1006.50, up from a low of 995.50. Demand for U.S. and German government bonds remained strong, with U.S. long bond yields firm at 4.84%.

Tim Harris, European equities strategist at

J.P. Morgan

in London, agreed that stock markets remained extremely risky. "Cash has a nice, comfortable feel to it right now."

But he said there was "selective value" in the market in such sectors as insurance, building materials and pharmaceuticals.

And although he agreed that there were no concrete G7 initiatives over the weekend to significantly improve market sentiment, he saw one big positive sign that indicates global rates will drop in coming months. "They at least have recognized that the focus should be on avoiding a global recession."

Harris said chances have improved that the U.K. will cut key rates Thursday, and many think Spain will cut rates this week. Italy had been expected to cut this week, but the government crisis might postpone that, he said.